Over the past 15 years, several new investment terms have been coined, including 1) cryptocurrency (the word had existed, but not the asset itself), 2) nonfungible token, 2) special-purpose acquisition company, and 4) unicorn. Beware financial novelties! Of the quartet, only the latter has not been disgraced.
That is because, unlike the other three assets, unicorns are proven investments. Cryptocurrencies and NFTs are, in effect, newly minted collectibles. Inevitably they have been roiled by both fraud and fluctuating demand. And SPACs were never created to last, being mechanisms for transferring wealth from retail investors to institutions. Sooner or later, the public would refuse the invitation.
Unicorns are different. Their exotic name notwithstanding, they are in fact traditional investments, conferring equity ownership. Specifically, they refer to the shares of privately held, startup businesses that are valued above $1 billion. Less colorfully, they can be described as late-stage venture capital companies.
Owning a claim on corporate cash flows distinguishes unicorns from their more troubled cousins. While cryptocurrencies and (except in rare cases) NFTs can never possess a claim on future income, and SPACs merely promise to make such an arrangement (after paying a steep buyers’ commission), investment unicorns automatically confer that benefit. They are, in effect, uncommon stock.